Climate change – A repressed challenge

There was a sliver of hope. Two years ago, heads of state and government from all over the world came together in Paris to forge a climate agreement that would limit global warming to well below two degrees Celsius and bring the consequences of climate change under some degree of control. A mere four weeks before the next climate summit is scheduled to take place in Bonn – it will be chaired by the Fiji Islands, a developing country heavily hit by climate change – the two-degree target now seems more remote than ever.

Ever since Paris, carbon emissions have remained virtually unchanged. However, carbon dioxide is a greenhouse gas that remains in the atmosphere for around 100 years. On behalf of future generations, we should be making every effort to reduce CO2 emissions. After all, the lower we keep the rise in global warming, the less severe the consequences will be for everyone.

The sum total of all losses from weather-related catastrophes worldwide since 1980 is huge: US$ 3,277bn. Of course it is not possible to reliably quantify how much of this figure is actually attributable to climate change. But, because of the extreme loss potential involved, reinsurers need to understand exactly how the probability and extent of certain events will shift as a result of climate change.

Scientifically speaking, global warming leads to increased evaporation of water. At the same time – because of higher temperatures – the atmosphere absorbs more moisture. So there is more energy available, which is released when water vapour condenses, and there may be more rain. The weather machine picks up speed, so to speak.

It is the prevailing opinion among scientists that climate change will produce a greater number of weather-related natural catastrophes in future. And a precise analysis of our loss data suggests that this is already evident in a number of regions, for instance in the form of losses from severe thunderstorms in the USA and in Europe. These storms have seen a significant increase, even after adjustment for the rise in exposed values.

Greater insurance density could help people, companies and entire economies get back on their feet more quickly after a catastrophe has struck.

Joachim Wenning

CEO Munich Re

The interdependencies are very complex, and it would be inappropriate to make any broad, sweeping statements. We must be cautious with what we say about hurricanes in the North Atlantic – and I mention this quite deliberately given this year’s series of hurricanes. Unlike with other types of hazard, the scientific community is not expecting climate change to result in a general rise in the frequency of storm events, but it does anticipate more frequent, very severe storms.

There is another exciting field of research we are also engaged in: Immediately after a weather-related natural catastrophe has occurred, systematic modelling is used to estimate how much more likely this individual occurrence has become on account of climate change. So we are gradually coming closer to the point where the consequences of climate change will be quantifiable. However, this is still going to take quite some time. And it would be unwise to refrain from taking measures designed to combat climate change and to adapt to its unavoidable consequences.

The main objective of insurance is to mitigate the financial impacts of loss events. Given the loss amounts caused by natural catastrophes worldwide, it is a serious problem that since 1980 less than one-third of the economic losses has been insured. The remaining losses had to be shouldered by the countries themselves and the people living there. There is hardly any financial protection available in emerging markets and developing countries. The countries affected suffer permanent developmental setbacks from their large numbers of victims and high uninsured property losses.

One positive example of the impact insurance can have in this regard is the island nation of Dominica. In September, Dominica was ravaged by Hurricane Maria, a storm of the highest category. Only a few days later, a pool specifically set up for the small Caribbean islands announced the payout of US$ 19m from an insurance contract.

Greater insurance density could help people, companies and entire economies get back on their feet more quickly after a catastrophe has struck. The gap in cover worldwide has lessened somewhat in the last few years, but it is still huge. Even in the USA and in Europe half – or even more – of total losses from natural catastrophes are not covered. Insurance can and will cover more losses, and thus achieve more in helping to cope with the consequences of climate change.

ABOUT MUNICH RE

FOLLOW US

We use cookies to improve your browsing experience and help us to improve our website.

By continuing to use our websites, you consent to the use of cookies. Please see our cookie policy for more information on cookies and information on how you can change your browser's settings.
You can disable cookies, however please note that disabling, deleting or disallowing cookies will affect your web experience.